MaxedOutMama
Friday, January 27, 2012
Hah, An Inventory Build
GDP Q4 increased by 90.8 billion. Admittedly, this is an advance number and it can and will change.
What we have so far is that personal consumption increased by 47.8 billion compared to the prior quarter's 40.8. Almost all of that was in durables (44.9 billion). Cars up 28.6 billion. Recreational goods and vehicles up 12.3 billion. Furniture and durable household goods up 5.7 billion. Non-durables were only up 8.5 billion, SA. These are all supposed to be price-adjusted numbers.
Gross private domestic investment increased 83.2 billion compared to the prior quarter's 5.8 billion. Unfortunately most of the difference was in inventory build (+58 billion compared to the prior quarter's -41.1 billion).
Net exports of goods and services was a subtraction at -3 billion compared to the prior quarter's +13.6 billion. There was almost no change in exports; imports, however, increased 23.6 billion compared to the prior quarter's increase of 6.5 billion.
Government spending plummeted at -29.1, compared to the prior quarter's -0.6 billion. The bulk of the change was in defense spending, which fell 23.5 billion. Federal non-defense expenditures rose 3.6 billion. State and local expenditures continued to decline, falling 9.7 billion. In the prior quarter it fell only 5.7 billion.
The best thing about this report was the equipment and software portion of Gross Private Domestic Investment, which increased 14.6 billion. This was significantly lower than the prior two quarters (+104.7; +42.2) but it was positive.
How you feel about Q1 has something to do with the inventory build. That is likely to slow; a lot of it is probably cars and trucks, which was mostly rebound from depressed production levels, largely because of the Japanese disaster and its effects. Ward's is projecting an improvement, but not a huge improvement in production levels:
Assuming this is true, quarter by quarter wouldn't necessarily show big increases. However most manufacturers are pretty upbeat in their outlook, and inventory levels didn't rise. Article.
I do have some hesitancy about the situation, because it seems as if auto dealers are focusing advertising on finance, as in finance for those who are having trouble paying for a new car. The supply of the marginals tends to exhaust quickly. I have been most unimpressed by the evolution of the auto loan portfolio at Compucredit. Despite hugely whittling down the portfolio, their delinquent/current ratios are barely improving. (See page 14 in this document, and then go to the next page and look at the unrecovereds.)
On the brighter side, deposit levels at banks are excellent and consumer credit is pretty stable, with some increases on car loans. But then I look at stats on food purchases, and I realize that the average consumer still must be very tight indeed. Just how tight?
Two variables describe the economic experience of most of the US population, and those are Food at Home and Gas & Energy (lines 9 & 11) from Table 2.3.3 at BEA:
That's hard to see. Here's the same graph with just the "both" categories:
Open these two graphs up and take a good look at them.
Most of the country is in recession, and that's occurring even though we have huge food stamp supplementation on the food.
Mind you, per capita consumption is dropping faster. This is absolute, but price-adjusted. What you are looking at are US households falling into increasing levels of economic distress.
What we have so far is that personal consumption increased by 47.8 billion compared to the prior quarter's 40.8. Almost all of that was in durables (44.9 billion). Cars up 28.6 billion. Recreational goods and vehicles up 12.3 billion. Furniture and durable household goods up 5.7 billion. Non-durables were only up 8.5 billion, SA. These are all supposed to be price-adjusted numbers.
Gross private domestic investment increased 83.2 billion compared to the prior quarter's 5.8 billion. Unfortunately most of the difference was in inventory build (+58 billion compared to the prior quarter's -41.1 billion).
Net exports of goods and services was a subtraction at -3 billion compared to the prior quarter's +13.6 billion. There was almost no change in exports; imports, however, increased 23.6 billion compared to the prior quarter's increase of 6.5 billion.
Government spending plummeted at -29.1, compared to the prior quarter's -0.6 billion. The bulk of the change was in defense spending, which fell 23.5 billion. Federal non-defense expenditures rose 3.6 billion. State and local expenditures continued to decline, falling 9.7 billion. In the prior quarter it fell only 5.7 billion.
The best thing about this report was the equipment and software portion of Gross Private Domestic Investment, which increased 14.6 billion. This was significantly lower than the prior two quarters (+104.7; +42.2) but it was positive.
How you feel about Q1 has something to do with the inventory build. That is likely to slow; a lot of it is probably cars and trucks, which was mostly rebound from depressed production levels, largely because of the Japanese disaster and its effects. Ward's is projecting an improvement, but not a huge improvement in production levels:
Assuming this is true, quarter by quarter wouldn't necessarily show big increases. However most manufacturers are pretty upbeat in their outlook, and inventory levels didn't rise. Article.
I do have some hesitancy about the situation, because it seems as if auto dealers are focusing advertising on finance, as in finance for those who are having trouble paying for a new car. The supply of the marginals tends to exhaust quickly. I have been most unimpressed by the evolution of the auto loan portfolio at Compucredit. Despite hugely whittling down the portfolio, their delinquent/current ratios are barely improving. (See page 14 in this document, and then go to the next page and look at the unrecovereds.)
On the brighter side, deposit levels at banks are excellent and consumer credit is pretty stable, with some increases on car loans. But then I look at stats on food purchases, and I realize that the average consumer still must be very tight indeed. Just how tight?
Two variables describe the economic experience of most of the US population, and those are Food at Home and Gas & Energy (lines 9 & 11) from Table 2.3.3 at BEA:
That's hard to see. Here's the same graph with just the "both" categories:
Open these two graphs up and take a good look at them.
Most of the country is in recession, and that's occurring even though we have huge food stamp supplementation on the food.
Mind you, per capita consumption is dropping faster. This is absolute, but price-adjusted. What you are looking at are US households falling into increasing levels of economic distress.
Thursday, January 26, 2012
Claims Much Better, Money Flow Brooding
Not the headline, of course, but the whole thing. The headline is that claims increased from 356K to 377K. But that's totally misleading - raw claims were rather high last week, and this week they look much better. Seasonal adjustments are a bit off here due to calendar changes. At 377,000 initial claims this week are right in line with the four week moving average of 377,500.
It appears likely that some of the seasonal hiring was retained due to better business and lower initial staffing levels. That does not square with what I have seen walking around, so I am iffy on that. There are probably some good regions out there. California is doing better, which is a big help.
Durables are good. Not great, but good. As long as primary metals hold out we know we have a few months of cushion. Some of the optimism over the US economy is overblown. Supermarkets and electronics look awful, for example. People really do not have much spare cash, and some stores are light stocking.
BUT I think we have finally seen some more balance sheet recoveries at smaller companies. This is a huge help that could be durable. Our weather is highly favorable - probably adding 3/4s of a percentage point to US GDP in Q1, so I am more positive. The reason for the huge surge is that a lot of the potential upside in the US this year is in construction/reconstruction, and that is unfortunately weather dependent. Everyone has to get lucky now and then, and this was our lucky winter. The last two were most definitely not. I expect better conditions in the US to help Canada and Mexico also in Q1.
Each year I go through my personal economic calendar and mark down anomalies - times when odd things have happened that will make the current period not directly comparable to the same period next year. Last year, for the first time, I have a nearly total annual coverage of anomalies, and for months at a time, they cover areas of the globe that exceed 50% of world economic output. By the time we got to the Thai floods, I was mentally staggered by the extent and continuity of the economic disruptions.
My conclusion is that I need three months of data this year to achieve certainty levels normally seen with one month's.
The flip side of that is that last year it was mostly negative anomalies, which strongly suggests that we get help this year from less in the way of negatives. We need that help.
Friday's rail data will be the first marginally comparable data this year. The first week of February will be the first reasonable petroleum data this year. I won't feel sure about claims until the middle of March. I will start to become more confident about employment data in February.
With those cautions, China appears to have a pretty big problem. Japan's problems shouldn't be sudden this year, but may diffuse into the region. When I look at data like this for Indonesia, I experience great bouts of thoughtfulness. Malaysia's still hanging in there, but Singapore is oscillating between negative and positive quarters. India's got a problem, and the problem is not really improving at all. The Japanese debt now becomes a real issue. The fix is for the yen to depreciate. That is the only possible fix, so I assume it will happen.
I am guessing that the flood of money inserted into the global economy by the European money toss will cushion the Japanese pull-back for a while this year. After that issues may emerge. China has built up a huge cushion in recent years, but I think it will need to use much of it to stabilize itself internally. Therefore I am sitting here thinking that global money flows may change quite dramatically over the next few years.
This BIS paper on global liquidity seems timely. Perhaps Chinese banks and trusts will be able to pick up some of the global slack. Perhaps not. European banks were tremendous funders of growth in peripheral countries.
It appears likely that some of the seasonal hiring was retained due to better business and lower initial staffing levels. That does not square with what I have seen walking around, so I am iffy on that. There are probably some good regions out there. California is doing better, which is a big help.
Durables are good. Not great, but good. As long as primary metals hold out we know we have a few months of cushion. Some of the optimism over the US economy is overblown. Supermarkets and electronics look awful, for example. People really do not have much spare cash, and some stores are light stocking.
BUT I think we have finally seen some more balance sheet recoveries at smaller companies. This is a huge help that could be durable. Our weather is highly favorable - probably adding 3/4s of a percentage point to US GDP in Q1, so I am more positive. The reason for the huge surge is that a lot of the potential upside in the US this year is in construction/reconstruction, and that is unfortunately weather dependent. Everyone has to get lucky now and then, and this was our lucky winter. The last two were most definitely not. I expect better conditions in the US to help Canada and Mexico also in Q1.
Each year I go through my personal economic calendar and mark down anomalies - times when odd things have happened that will make the current period not directly comparable to the same period next year. Last year, for the first time, I have a nearly total annual coverage of anomalies, and for months at a time, they cover areas of the globe that exceed 50% of world economic output. By the time we got to the Thai floods, I was mentally staggered by the extent and continuity of the economic disruptions.
My conclusion is that I need three months of data this year to achieve certainty levels normally seen with one month's.
The flip side of that is that last year it was mostly negative anomalies, which strongly suggests that we get help this year from less in the way of negatives. We need that help.
Friday's rail data will be the first marginally comparable data this year. The first week of February will be the first reasonable petroleum data this year. I won't feel sure about claims until the middle of March. I will start to become more confident about employment data in February.
With those cautions, China appears to have a pretty big problem. Japan's problems shouldn't be sudden this year, but may diffuse into the region. When I look at data like this for Indonesia, I experience great bouts of thoughtfulness. Malaysia's still hanging in there, but Singapore is oscillating between negative and positive quarters. India's got a problem, and the problem is not really improving at all. The Japanese debt now becomes a real issue. The fix is for the yen to depreciate. That is the only possible fix, so I assume it will happen.
I am guessing that the flood of money inserted into the global economy by the European money toss will cushion the Japanese pull-back for a while this year. After that issues may emerge. China has built up a huge cushion in recent years, but I think it will need to use much of it to stabilize itself internally. Therefore I am sitting here thinking that global money flows may change quite dramatically over the next few years.
This BIS paper on global liquidity seems timely. Perhaps Chinese banks and trusts will be able to pick up some of the global slack. Perhaps not. European banks were tremendous funders of growth in peripheral countries.
Wednesday, January 25, 2012
Ah, Well, I'm A Heretic
We are talking about a cultural as much as an economic divide. I think Assistant Village Idiot's post and the links within provide a much more serious set of questions than any asked or recently answered in the political realm.
I read AVI's post and all the links, and to my surprise the thing my mind picked out was the changed societal role of men as the determining factor. I have a theory, I'll sleep on it, and then I'll reconsider tomorrow.
The post is really worth reading. At least it asks a worthwhile set of questions.
On another question of determined unrealism, it looks like the Greek thing is gonna bust quite soon, because the ECB was running around stating very loudly that it wasn't going to take losses on the Greek bonds. The Germans were in favor of that position.
However, it is this exact position that makes most of the bailout fund theory of Italian/Irish/Portuguese salvation so unlikely. They are playing with fire, and the ECB doesn't have much to lose now in this case, but it has a huge problem if its money-throwing exercise can't be used to leverage an exit from the economic brink for Italy. In effect, the ECB has chomped up a bunch of sovereign bond assets as collateral from banks. There was no option, because banks in both Italy and France would have been in extreme danger if they had not done it.
Perhaps the ECB now believes that its money-throwing exercise is enough. It isn't. They can throw all the money they want, but if the private bondholders get out, several of these nations are doomed, and the ECB won't be able to get out. So the ECB and the IMF have to take the hit now. They already promised that Greece would be a unique case, and that private bondholders won't be forced to take all the hit on the other nations. There is no reason to insist on Greece being a unique case, especially since it eventually forces all the loss on the private bondholders.
For over a year, the European approach to dealing with the sovereign insolvency problem has been to generate a massive cloud of plausible deniability. That is going to end. Certainties will emerge either way. It is best if the certainties emerge with the largest possible pool of indebted. If that does not happen, Italy and Ireland may fold up very quickly. I think Germany is the sole real roadblock now, and I suppose Germany will fold on this one.
I read AVI's post and all the links, and to my surprise the thing my mind picked out was the changed societal role of men as the determining factor. I have a theory, I'll sleep on it, and then I'll reconsider tomorrow.
The post is really worth reading. At least it asks a worthwhile set of questions.
On another question of determined unrealism, it looks like the Greek thing is gonna bust quite soon, because the ECB was running around stating very loudly that it wasn't going to take losses on the Greek bonds. The Germans were in favor of that position.
However, it is this exact position that makes most of the bailout fund theory of Italian/Irish/Portuguese salvation so unlikely. They are playing with fire, and the ECB doesn't have much to lose now in this case, but it has a huge problem if its money-throwing exercise can't be used to leverage an exit from the economic brink for Italy. In effect, the ECB has chomped up a bunch of sovereign bond assets as collateral from banks. There was no option, because banks in both Italy and France would have been in extreme danger if they had not done it.
Perhaps the ECB now believes that its money-throwing exercise is enough. It isn't. They can throw all the money they want, but if the private bondholders get out, several of these nations are doomed, and the ECB won't be able to get out. So the ECB and the IMF have to take the hit now. They already promised that Greece would be a unique case, and that private bondholders won't be forced to take all the hit on the other nations. There is no reason to insist on Greece being a unique case, especially since it eventually forces all the loss on the private bondholders.
For over a year, the European approach to dealing with the sovereign insolvency problem has been to generate a massive cloud of plausible deniability. That is going to end. Certainties will emerge either way. It is best if the certainties emerge with the largest possible pool of indebted. If that does not happen, Italy and Ireland may fold up very quickly. I think Germany is the sole real roadblock now, and I suppose Germany will fold on this one.
Tuesday, January 24, 2012
But He Tells Such Inspirational Lies!
Tonight's SOTU - I listened to it on the radio while neurotically scrubbing things down with bleach - struck me as tragic.
It was a great speech, backed by little cohesive policy, imbued with lofty ideals and high hopes, sounding genuinely inspirational notes. It was a tragic speech, because if Obama had ever bothered to sit down and engage with reality during his presidency, he could have been a truly great president.
It was a very American speech. I think we elected Obama because we were not yet prepared to deal with reality, and we wanted him to reinforce our delusions. This man has truly impressive political skills and no idea whatsoever as to what to do to make things better. None of his proposals ever add up, and now he has really almost stopped making them.
I suspect that the American public, which generally is wading hip deep in smelly reality, is in the mood to move on from our delusions, provided that the adjustment to reality isn't too painful. The strong response to Ron Paul's candidacy among the young implies that something has changed.
Mitch Daniels is someone who would tell the truth in a campaign. It would have been interesting to test the contrast between the two and see whether the American public is prepared to deal with it.
Added reactions:
1) DU, top thread when I went to the General Discussion forum:
Is Obama not the best looking President We've Had In Decades?
2) Ann Althouse noticed the weird pronounciations also. Reggalations? I don't know what Obama was trying to do with that.
3) Robert Samuelson in an earlier article on the Keystone decision summed up the laundry list in tonight's speech:
4) If Obama really wants to fix the "reggalations" problem, he might want to change a few things at EPA. His line about opening up public lands was pure BS - you can't get a permit to do anything. You can get a lease, but you won't get permission to use it. As Carl carefully explained in a prior post, all that "clean fuel" stuff is getting weirder and weirder day by day.
5) One of my brothers claims that we are doomed to growing acrimony between the parties not because of political spin but because we've pushed things to the point at which there can be no middle ground on many issues.
6) The Anchoress, writing on a very different topic:
It was a great speech, backed by little cohesive policy, imbued with lofty ideals and high hopes, sounding genuinely inspirational notes. It was a tragic speech, because if Obama had ever bothered to sit down and engage with reality during his presidency, he could have been a truly great president.
It was a very American speech. I think we elected Obama because we were not yet prepared to deal with reality, and we wanted him to reinforce our delusions. This man has truly impressive political skills and no idea whatsoever as to what to do to make things better. None of his proposals ever add up, and now he has really almost stopped making them.
I suspect that the American public, which generally is wading hip deep in smelly reality, is in the mood to move on from our delusions, provided that the adjustment to reality isn't too painful. The strong response to Ron Paul's candidacy among the young implies that something has changed.
Mitch Daniels is someone who would tell the truth in a campaign. It would have been interesting to test the contrast between the two and see whether the American public is prepared to deal with it.
Added reactions:
1) DU, top thread when I went to the General Discussion forum:
Is Obama not the best looking President We've Had In Decades?
2) Ann Althouse noticed the weird pronounciations also. Reggalations? I don't know what Obama was trying to do with that.
3) Robert Samuelson in an earlier article on the Keystone decision summed up the laundry list in tonight's speech:
It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.I was playing the constituency game with this one.
4) If Obama really wants to fix the "reggalations" problem, he might want to change a few things at EPA. His line about opening up public lands was pure BS - you can't get a permit to do anything. You can get a lease, but you won't get permission to use it. As Carl carefully explained in a prior post, all that "clean fuel" stuff is getting weirder and weirder day by day.
5) One of my brothers claims that we are doomed to growing acrimony between the parties not because of political spin but because we've pushed things to the point at which there can be no middle ground on many issues.
6) The Anchoress, writing on a very different topic:
You want the truth? You think you deserve it? The press can’t handle the truth; they can’t bring it to you. The New York Times just ignores inconvenient truth, entirely.Obama's very much a creature of his times. But so are we, and that's why he's in the White House! Mitch Daniels just appealed to a nation of adults. Are we that nation?
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There Is Such A Thing As Telling Too Many Lies
Especially in your fourth SOTU speech:
He's really pissed some people off with this one. Mitch Daniels is supposed to be giving the equal-time thingie. This will just flood us Daniel-ites with nostalgia for the best candidacy that never was.
I think I'll scrub the bathroom down tonight. Last night I watched the GOP debate. There was not huge realism on the fiscal situation there, either. Also Romney was acting weird. About 40 minutes in I decided that he was trying to be Ronald Reagan. Maybe I'm wrong. I do admire the man for his impressive donations to charity. He is not a hypocrite like so many; I also don't get the sense that he has much in the way of real answers for our social and fiscal dilemmas.
In the meantime, George Soros wants us to embrace the "Age of Fallibility"? Huh?
Found it. His book.
Since Obama took office, U.S. natural gas production averaged 1.89 trillion cubic feet a month through October, 13 percent higher than the average during President George W. Bush’s two terms, according to Energy Department data. Crude oil production is 2 percent higher, the department said.
“To be sure that is not because the White House meant for that to happen,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc.
He's really pissed some people off with this one. Mitch Daniels is supposed to be giving the equal-time thingie. This will just flood us Daniel-ites with nostalgia for the best candidacy that never was.
I think I'll scrub the bathroom down tonight. Last night I watched the GOP debate. There was not huge realism on the fiscal situation there, either. Also Romney was acting weird. About 40 minutes in I decided that he was trying to be Ronald Reagan. Maybe I'm wrong. I do admire the man for his impressive donations to charity. He is not a hypocrite like so many; I also don't get the sense that he has much in the way of real answers for our social and fiscal dilemmas.
In the meantime, George Soros wants us to embrace the "Age of Fallibility"? Huh?
Found it. His book.
Thursday, January 19, 2012
Quick Note On US CPI
The combination of December CPI (release) and ongoing commodity increases imply that overall consumer inflation is likely to shift up again. Gas prices are rising and while steep cuts in the more frivolous food categories can be seen in some grocery stores, the underlying trend is up now.
As of December, CPI-U was 3% YoY; CPI-W was 3.2% YoY. Food at home for the wealthier consumers was still up 6% YoY; food at home for the lower-income bracket was up 6.1%.
The ECB's program is likely to notch prices up world wide - there should be a pretty rapid dissemination around the world in commodity buying. If sexpectations about the Chinese money-hurling operation pan at at all, you can expect a strong surge of consumer inflation over the first half.
The ECB ops are truly massive, and they have a very fast follow-through. Prices will be unresponsive to demand shifts for months to come, and many companies are still recouping earlier inflation-inflicted losses. So be wary.
As of December, CPI-U was 3% YoY; CPI-W was 3.2% YoY. Food at home for the wealthier consumers was still up 6% YoY; food at home for the lower-income bracket was up 6.1%.
The ECB's program is likely to notch prices up world wide - there should be a pretty rapid dissemination around the world in commodity buying. If sexpectations about the Chinese money-hurling operation pan at at all, you can expect a strong surge of consumer inflation over the first half.
The ECB ops are truly massive, and they have a very fast follow-through. Prices will be unresponsive to demand shifts for months to come, and many companies are still recouping earlier inflation-inflicted losses. So be wary.
Initial Claims, Hmmph, Seasonal Adjustments
At first I was very happy, and then I looked at the data and went "WHAT????".
Here's the release. Last week the SA number increased, but the YoY raw claims number looked really good, so I didn't think it meant anything bad. The raw initial number last week was 642K versus the prior year's 773K, and that is a big decrease. This week the pattern reversed - the raw initial number is 521K versus 549K in the prior year. However the SA number last year was reported at 415K, and this year it is reported at 352K. So this fluctuation is attributable at least partially to seasonal adjustment factors. This can happen at this time of year as seasonal employment fluctuations hit a high and calendar shifts of a day can make a difference in seasonal adjustments.
The raw numbers don't look bad. The real trend now is probably for a slight increase in initial claims, but again, it's no big move that I can see. That is good since the traveling trend is for weekly seasonally adjusted claims under 400K.
What I normally due for this period is to add a four-week series of raw claims and compare those to the prior year's:
The latest adjustment for covered employment shows a nice uptick - the last quarter was 126,188,733, and when the states reported new data it came to 126,579,970. In the first quarter of 2011 we were still declining, and as of the second quarter of 2011 we started inching up again. This was a nice gain!
For comparison purposes, as of Q1 2010 we were still in the 130,000,000 range, so it has been a long time coming and we have very far to go. The peak covered employment in the last business cycle was 133,902,387 in Q3 2008. Still 7.3 million down. The civilian labor force level is slowly diminishing, so that accounts for dropping unemployment:
I noticed some Fed heads predicting that unemployment would rise. That normally does happen, but I think in this cycle demographics overcomes the enthusiasm effect and the labor force doesn't rebound. One striking effect is the rise in US employment of those who are 65 and older:
The striking correlation between the claims base increases and this graph makes me think that Americans 62 and older account for most of the employment gains in the last year. I think older Americans are going on SS (often early) and then picking up part-time jobs to make ends meet. Usually there is at least a year or two difference between the ages in older couples, and in any case almost all of the gains have been in part-time employment.
The labor market's never been worse for teens and early 20s. I think it may be worse now than during much of the Great Depression.
Here's the release. Last week the SA number increased, but the YoY raw claims number looked really good, so I didn't think it meant anything bad. The raw initial number last week was 642K versus the prior year's 773K, and that is a big decrease. This week the pattern reversed - the raw initial number is 521K versus 549K in the prior year. However the SA number last year was reported at 415K, and this year it is reported at 352K. So this fluctuation is attributable at least partially to seasonal adjustment factors. This can happen at this time of year as seasonal employment fluctuations hit a high and calendar shifts of a day can make a difference in seasonal adjustments.
The raw numbers don't look bad. The real trend now is probably for a slight increase in initial claims, but again, it's no big move that I can see. That is good since the traveling trend is for weekly seasonally adjusted claims under 400K.
What I normally due for this period is to add a four-week series of raw claims and compare those to the prior year's:
2011:It looks okay to me! The next two weeks the claims shift down, so we've passed the bulge.
12/25/2010: 525,710
01/01/2011: 578,904
01/08/2011: 773,499
01/15/2011: 549,688
Total: 2,427,801
2012:
12/24/2011: 497,689
12/31/2011: 540,067
01/07/2012: 646,219
01/14/2012: 521,613
Total: 2,205,588 (-9.2% )
The latest adjustment for covered employment shows a nice uptick - the last quarter was 126,188,733, and when the states reported new data it came to 126,579,970. In the first quarter of 2011 we were still declining, and as of the second quarter of 2011 we started inching up again. This was a nice gain!
For comparison purposes, as of Q1 2010 we were still in the 130,000,000 range, so it has been a long time coming and we have very far to go. The peak covered employment in the last business cycle was 133,902,387 in Q3 2008. Still 7.3 million down. The civilian labor force level is slowly diminishing, so that accounts for dropping unemployment:
I noticed some Fed heads predicting that unemployment would rise. That normally does happen, but I think in this cycle demographics overcomes the enthusiasm effect and the labor force doesn't rebound. One striking effect is the rise in US employment of those who are 65 and older:
The striking correlation between the claims base increases and this graph makes me think that Americans 62 and older account for most of the employment gains in the last year. I think older Americans are going on SS (often early) and then picking up part-time jobs to make ends meet. Usually there is at least a year or two difference between the ages in older couples, and in any case almost all of the gains have been in part-time employment.
The labor market's never been worse for teens and early 20s. I think it may be worse now than during much of the Great Depression.
Wednesday, January 18, 2012
Forget Utilities, What About Seattle?
Snowmaggedon may be less than feared, but one inch of snow in Seattle can create havoc.
The nicest part of this video is the bit where some kind soul shares the theory and practice of tire chains with a benighted traveller:
If you have to drive in Seattle, don't despair. Driving in Portland would be SO much worse:
This particular one is from Seattle. I think they need pedestrian/snow insurance in Seattle:
You may be as confused as I at how they manage that. It turns out - they practice!
The nicest part of this video is the bit where some kind soul shares the theory and practice of tire chains with a benighted traveller:
If you have to drive in Seattle, don't despair. Driving in Portland would be SO much worse:
This particular one is from Seattle. I think they need pedestrian/snow insurance in Seattle:
You may be as confused as I at how they manage that. It turns out - they practice!
I Smell Something Dead Somewhere
Industrial Production came in +0.4 after November's -0.3.
What I was waiting for in this report was utilities. Think Christmas lights, etc. Maybe some of this is in municipal lighting, but there's a dead rat in the basement of the economic good news edifice, because utilities began to fall in August, and haven't stopped.
Weather has less of an effect on utilities than people think. We are now down 6.6% over the year. I'd buy 3%, maybe 4%, but not that much.
Over the long term, the correlation between utilities and GDP is - here, evaluate it yourself:
Blue line is utilities, red is real GDP, and green is real PCE.
The yellowish/orangish thing is real PCE divided by real GDP, with the result multiplied by a hundred to scale well on a 100-point scale.
That last basically measures the contribution of personal consumption to GDP. I do think production is beginning to contribute slightly more to the economy, but increased production should show up in utilities. A five month negative run worries me.
The one year change is pretty steep, and it started in the summer.
At the very least, I suspect that there might be some downward revisions to GDP at a later date.
Some of this is due to conservation at municipalities and homes. That degree of conservation would have something to say about the strength of the economy, though.
Is this the wood stove/kerosene lamp economy now for the lower third?
What I was waiting for in this report was utilities. Think Christmas lights, etc. Maybe some of this is in municipal lighting, but there's a dead rat in the basement of the economic good news edifice, because utilities began to fall in August, and haven't stopped.
Weather has less of an effect on utilities than people think. We are now down 6.6% over the year. I'd buy 3%, maybe 4%, but not that much.
Over the long term, the correlation between utilities and GDP is - here, evaluate it yourself:
Blue line is utilities, red is real GDP, and green is real PCE.The yellowish/orangish thing is real PCE divided by real GDP, with the result multiplied by a hundred to scale well on a 100-point scale.
That last basically measures the contribution of personal consumption to GDP. I do think production is beginning to contribute slightly more to the economy, but increased production should show up in utilities. A five month negative run worries me.
The one year change is pretty steep, and it started in the summer.
At the very least, I suspect that there might be some downward revisions to GDP at a later date.
Some of this is due to conservation at municipalities and homes. That degree of conservation would have something to say about the strength of the economy, though.
Is this the wood stove/kerosene lamp economy now for the lower third?
Monday, January 16, 2012
Occasionally It Happens
I never know quite what causes it nor what will happen, but I have entered the Plak Tau of M_O_Mish monetary theory, its relation to credit cycles, and business cycles.
It may have something to do with all the wood I've been splitting. An alternative explanation is that it was somehow sparked by all the Freudish stuff I've been reading. The insanity going on in Europe drove me to read a book about the evolution of Freudian psychoanalysis, but fortunately the book only goes up the 50s so it is less jargonized. I now understand more of the vicious accuracy of the Shrink's comment that Europeans were infantile.
he problem is that I really can't do anything else until I've worked this out. Anything else intellectual, that is. I'll be back soon. The wood pile is growing very rapidly.
I have about had it with modern IDonomics (the science of believing what you want to about the economy as long as you dress up your fantasy with a lot of equations).
PS: As you can see, I also become nearly illiterate when this happens!
It may have something to do with all the wood I've been splitting. An alternative explanation is that it was somehow sparked by all the Freudish stuff I've been reading. The insanity going on in Europe drove me to read a book about the evolution of Freudian psychoanalysis, but fortunately the book only goes up the 50s so it is less jargonized. I now understand more of the vicious accuracy of the Shrink's comment that Europeans were infantile.
he problem is that I really can't do anything else until I've worked this out. Anything else intellectual, that is. I'll be back soon. The wood pile is growing very rapidly.
I have about had it with modern IDonomics (the science of believing what you want to about the economy as long as you dress up your fantasy with a lot of equations).
PS: As you can see, I also become nearly illiterate when this happens!
Saturday, January 14, 2012
Gold Bonds - Taxing Matters
I begin with the thesis that we cannot possibly raise taxes sufficiently in the near term to stop a federal borrowing disaster from forming.
However, in deference to people's sensibilities, the normal humn reluctance to accept unpleasant truths, and all the nonsense in the media, I think I should support that thesis rather solidly. That will require more graphs, although I hate them. So:
Most of the media does not define terms and in some cases willfully obscures the problem.
This graph shows four indicators.
Indexed on the left as percent change over the year are:
A) Thin blue line = Gross Federal Debt. That is rather meaningless, but it is the number often cited.
B) The thin green line = Real GDP.
C) The red line = Federal Debt Held By The Public. This is "real" federal debt. It is debt that has been issued, on which interest is paid, and which has been sold to ex-government entities. As you can see, it took a wild hop upward as a result of the Great Recession, but it does take a big hop up in every recession.
The black line, which is indexed to the RIGHT, is a long time series of Federal Debt Held By The Public divided by Real GDP. This is the important number going forward. Until you have to float your debt, creditors are not bothered by it. Creditors could not care less about theoretical debt, because they are not competing with it for repayment. As of the end of Q3 2011, it was about 77-78% of Real GDP. What matters is not so much the level of FDHBTP, but the ratio to Real GDP.
It is important to compare publicly-issued debt to real GDP rather than nominal GDP, because interest has to be paid on that debt, and the ratio of debt to GDP plus interest rate demanded determines when it becomes difficult to pay interest on it.
Inflating the dollar, regardless of what numerous hopeful idiots write, is of little use when a high proportion of public expenditures are spent on funding basic needs of the population. As inflation goes up, so do those expenditures, and worse yet, inflation-adjusted social spending tends to rise faster than real incomes of the working population, which gets you in fiscal trouble damned quick. Real incomes for the working population drop, real consumer expenditures go down, and the ratio of public spending to tax collections tends to rise. This is one reason the Germans are so afraid of inflation.
Whether inflation is a cure for high levels of government debt depends on several variables, most specifically demographics, the health of the economy (will drops in real income induced by higher real taxation produce more workers seeking to earn more or reduced real spending by workers, and thus a decline in GDP?), the ratio of social spending to total government spending (including interest), the ratio of "easily cut" government spending to total government spending (including interest), the ratio of social benefits available without working or by working minimally to real income increase potential by working, and the total societal debt-to-income ratio. As society-wide debt-to-income ratios rise, the ability to withstand higher real levels of taxation declines - there is, to state it simply, less money to spare to invest and to potentially lose. The need to save rises.
Let us proceed further:
This graph shows the previous black line, which is the ratio of Federal Debt Held By The Public to Real GDP, two employment levels.
The two employment levels are indexed to the right and include (blue) total employment as a number, and (green) not in labor force as a number.
The red line - deeply significant - is the ratio the total number of employed persons to the persons not in the labor force. These persons may not be in the labor force because they are too young, too old, are disabled, have enough resources to live without working, or because they cannot find work.
Please note that I did not use the more accurate level indicator for persons working full time. Those persons are essentially those who can support themselves from their labor plus pay significant total taxes (federal, state and local) - most of the part-time workers are receiving significant government transfer benefits, and are net subtractions. The red line would look much worse if I had used full-time number, and I really should have used it, but I've recently referred to it and I don't want to be accused of being alarmist. So what you are looking at here is not just grim reality, but grim reality viewed with a rose-colored lens. Please be aware of this as you continue. The error bars are all to the negative (more fiscally insecure).
If you will double click on this graph or open it up in a larger detail, you will notice that the red line has trended downward for over a decade, but took a big drop associated with the recession. Since, it has not recovered. This is substantially due to demographics (retirements) plus poor employment opportunities. It is reducing our official unemployment rate without greatly improving our economic structure.
This red line is also very important, and so both it and the black line will travel with us to our final graph in this series. I call this one the Trinity of Taxing Terror:
The final member of the trinity is the orangish/burnt umber line sort of traveling in wavy fashion straight across this graph.
I included the other lines to show total state, local and federal receipts.
The last member of the trinity is nominal total US government receipts (at all levels) divided by nominal GDP.
BURNT umber indeed. Despite all the chatter about lower taxes, the ratio of total taxes/GDP just hasn't moved much in four decades. In fact, it only takes one glib glance at this thing to see that the strong bumps seem to be associated with (cough) bubbles. Do we need more bubbles? No, because they keep causing more recessions.
I strongly encourage readers to view a larger version of this graph and look carefully at the non-bubble inflections. Put on your non-Krugman lenses and really look at this thing. Look carefully at all the lines on this graph. Lookat how they move together.
If your non-Krugman lenses are working, you should see:
A) Taxes at the state and local level didn't drop like like federal taxes did as the result of the recession. Instead, they rose. Now if you are Krugman, you can totally ignore this fact and wail loudly about the horrible effects of states cutting real spending, but it appears obvious that they were forced to do so, and not cutting real spending would have forced them to raise taxes even more, and raising taxes is just as much a subtraction from the economy as cutting spending, and may be more of one.
B) The 1970s were considered to be a high-tax era, but if you look at the ratio of taxes to GDP now compared to then, you see it is actually the same or higher. This is largely because of state and local real tax increases, and it therefore the pension problem at the state and local level is just about impossible to solve without cutting vested pension benefits and/or cutting promised medical benefits in many plans.
C) If we made all those changes in tax policy and never succeeded escaping from the 30-32% bound, we are not suddenly going to jack up taxation to 40% of GDP and see growth in the economy. No, instead we would see a collapse in the economy, which the graph tells us reduces the ratio of tax receipts to GDP. Also, if we enter a recession we have to expect Federal Debt Held By The Public to jump up, so raising taxes too much appears to be a self-defeating strategy. For further detail on that, we can refer to Spain, Greece and Italy. Call them laboratories of dire debt in action.
The last piece of this Gordian knot is of course social spending by governments. That will be the next post in this series.
However, in deference to people's sensibilities, the normal humn reluctance to accept unpleasant truths, and all the nonsense in the media, I think I should support that thesis rather solidly. That will require more graphs, although I hate them. So:
Most of the media does not define terms and in some cases willfully obscures the problem.
This graph shows four indicators.
Indexed on the left as percent change over the year are:
A) Thin blue line = Gross Federal Debt. That is rather meaningless, but it is the number often cited.
B) The thin green line = Real GDP.
C) The red line = Federal Debt Held By The Public. This is "real" federal debt. It is debt that has been issued, on which interest is paid, and which has been sold to ex-government entities. As you can see, it took a wild hop upward as a result of the Great Recession, but it does take a big hop up in every recession.
The black line, which is indexed to the RIGHT, is a long time series of Federal Debt Held By The Public divided by Real GDP. This is the important number going forward. Until you have to float your debt, creditors are not bothered by it. Creditors could not care less about theoretical debt, because they are not competing with it for repayment. As of the end of Q3 2011, it was about 77-78% of Real GDP. What matters is not so much the level of FDHBTP, but the ratio to Real GDP.
It is important to compare publicly-issued debt to real GDP rather than nominal GDP, because interest has to be paid on that debt, and the ratio of debt to GDP plus interest rate demanded determines when it becomes difficult to pay interest on it.
Inflating the dollar, regardless of what numerous hopeful idiots write, is of little use when a high proportion of public expenditures are spent on funding basic needs of the population. As inflation goes up, so do those expenditures, and worse yet, inflation-adjusted social spending tends to rise faster than real incomes of the working population, which gets you in fiscal trouble damned quick. Real incomes for the working population drop, real consumer expenditures go down, and the ratio of public spending to tax collections tends to rise. This is one reason the Germans are so afraid of inflation.
Whether inflation is a cure for high levels of government debt depends on several variables, most specifically demographics, the health of the economy (will drops in real income induced by higher real taxation produce more workers seeking to earn more or reduced real spending by workers, and thus a decline in GDP?), the ratio of social spending to total government spending (including interest), the ratio of "easily cut" government spending to total government spending (including interest), the ratio of social benefits available without working or by working minimally to real income increase potential by working, and the total societal debt-to-income ratio. As society-wide debt-to-income ratios rise, the ability to withstand higher real levels of taxation declines - there is, to state it simply, less money to spare to invest and to potentially lose. The need to save rises.
Let us proceed further:
This graph shows the previous black line, which is the ratio of Federal Debt Held By The Public to Real GDP, two employment levels.
The two employment levels are indexed to the right and include (blue) total employment as a number, and (green) not in labor force as a number.
The red line - deeply significant - is the ratio the total number of employed persons to the persons not in the labor force. These persons may not be in the labor force because they are too young, too old, are disabled, have enough resources to live without working, or because they cannot find work.
Please note that I did not use the more accurate level indicator for persons working full time. Those persons are essentially those who can support themselves from their labor plus pay significant total taxes (federal, state and local) - most of the part-time workers are receiving significant government transfer benefits, and are net subtractions. The red line would look much worse if I had used full-time number, and I really should have used it, but I've recently referred to it and I don't want to be accused of being alarmist. So what you are looking at here is not just grim reality, but grim reality viewed with a rose-colored lens. Please be aware of this as you continue. The error bars are all to the negative (more fiscally insecure).
If you will double click on this graph or open it up in a larger detail, you will notice that the red line has trended downward for over a decade, but took a big drop associated with the recession. Since, it has not recovered. This is substantially due to demographics (retirements) plus poor employment opportunities. It is reducing our official unemployment rate without greatly improving our economic structure.
This red line is also very important, and so both it and the black line will travel with us to our final graph in this series. I call this one the Trinity of Taxing Terror:
The final member of the trinity is the orangish/burnt umber line sort of traveling in wavy fashion straight across this graph.
I included the other lines to show total state, local and federal receipts.
The last member of the trinity is nominal total US government receipts (at all levels) divided by nominal GDP.
BURNT umber indeed. Despite all the chatter about lower taxes, the ratio of total taxes/GDP just hasn't moved much in four decades. In fact, it only takes one glib glance at this thing to see that the strong bumps seem to be associated with (cough) bubbles. Do we need more bubbles? No, because they keep causing more recessions.
I strongly encourage readers to view a larger version of this graph and look carefully at the non-bubble inflections. Put on your non-Krugman lenses and really look at this thing. Look carefully at all the lines on this graph. Lookat how they move together.
If your non-Krugman lenses are working, you should see:
A) Taxes at the state and local level didn't drop like like federal taxes did as the result of the recession. Instead, they rose. Now if you are Krugman, you can totally ignore this fact and wail loudly about the horrible effects of states cutting real spending, but it appears obvious that they were forced to do so, and not cutting real spending would have forced them to raise taxes even more, and raising taxes is just as much a subtraction from the economy as cutting spending, and may be more of one.
B) The 1970s were considered to be a high-tax era, but if you look at the ratio of taxes to GDP now compared to then, you see it is actually the same or higher. This is largely because of state and local real tax increases, and it therefore the pension problem at the state and local level is just about impossible to solve without cutting vested pension benefits and/or cutting promised medical benefits in many plans.
C) If we made all those changes in tax policy and never succeeded escaping from the 30-32% bound, we are not suddenly going to jack up taxation to 40% of GDP and see growth in the economy. No, instead we would see a collapse in the economy, which the graph tells us reduces the ratio of tax receipts to GDP. Also, if we enter a recession we have to expect Federal Debt Held By The Public to jump up, so raising taxes too much appears to be a self-defeating strategy. For further detail on that, we can refer to Spain, Greece and Italy. Call them laboratories of dire debt in action.
The last piece of this Gordian knot is of course social spending by governments. That will be the next post in this series.
Friday, January 13, 2012
Friday The 13th?
The surprise is not France's downgrade. Everyone really expected that. But Italy goes to BBB+. That's not a surprise, but under the circs I guess it really won't help.
By Monday the question will be the ratings on the joint European debt facilities. Monti is pushing hard for Eurobonds, but what would the rating on them be?
By Monday the question will be the ratings on the joint European debt facilities. Monti is pushing hard for Eurobonds, but what would the rating on them be?
Gold Bonds - Because Reality Always Wins
If reality always wins, then you have to be on the side of reality, and your planning has to be rooted in reality.
Ugly truth number 1:
By many measures, the US economy is already in a recession. It isn't quite in one yet, because the correlations haven't totally formed a controlling downward interaction.
Take a good look at this graph. It has YoY changes for real retail sales (through November, blue), real disposable personal income (red, through Q3), and government current receipts (gross, not real, in green).
Real disposable personal income is at 0% increase over the year. This doesn't usually happen in the run-up to a normal US recession, much less in a recovery. It's a dire signal.
Here is a long time series of government current receipts and real disposable personal income:
Reminder: real disposable personal income is calculated by subtracting taxes from income plus adjusting for inflation.
The mid 1970s recession is kind of similar, and it was caused mostly by high structural inflation which cut real incomes. One of the problems was energy. That accounted for a lot of the problem. Another problem was that tax brackets weren't pegged to inflation, so many persons ended up with constantly declining real incomes.
Thus, during the 70s sequence you see the apparent paradox of very high growth in government current receipts while growth in real personal disposable income lagged and then collapsed. Both the mid-70s recession, which was a very deep one, and the early 81 recession were caused by falls in real disposable personal income.
Usually in the US big drops in real disposable personal income are at least partly the result of the recession, with two counter-balancing factors coming into play - costs tend to drop as consumption and spending drop, which raises real incomes for all the people who don't lose employment or income, and many people do lose employment or income, which causes a drop in real personal income.
One of the major factors in the last recession was that as inflation dropped out, early in the recession real incomes rose sharply. That helped a great deal, but as the housing and credit bubbles kept popping, the downward drag took over again. However it was not until late 2010, when the misguided QE2 pumped a lot more money into commodities, that inflation really took off and choked off the slow recovery in real personal income.
Now it should be obvious that the FICA payroll tax cut has impaired government revenues, although it did support real disposable personal income. Therefore, without increasing the federal deficit, real personal disposable incomes would look worse since late 2010.
Inflation will remain in the system through the next year. It may in fact be boosted by efforts to deal with the European debt crisis and the ripple effects, plus structurally slower real global growth.
US real retail sales do not show the normal pre-recession pattern of either continuously falling down to zero or getting stuck at no real growth. This is largely because of the FICA tax cut, which has to be one of the most ill-designed economic stimulus packages the US ever instituted post WWII. The FICA tax cut gave thousands in additional real income to a very small portion of the US population that already accounts for a disproportionate amount of personal consumption (because they have the money). This masked the fact that most of the population was seeing declining real incomes:
No problem at all, right? Or maybe it is.
The problem in the US is not wealthy people - it's that job creation has just stopped, and this plus inflation is depressing real incomes for most people. You don't have income mobility without jobs.
Living wage jobs have dropped over the course of a decade.
That red line is the number (absolute, not as a percent of working-age population) of full-time jobs. In eleven years, it hasn't increased.
The blue line is all jobs. We have added many part-time jobs, which diffuses the same level of income among a larger number of people who have less in the way of benefits.
Needless to say, we are supporting personal consumption with income transfers to the population. That's the black line.
The fundamentals for job creation have shifted slightly positively, despite the best efforts of our national government to destroy the economy. We cannot approach a real jobs recovery in less than 10 years, and if Obama gets another term make it 15 years.
The really strong element in the US economy preventing another recession is simply increased government transfers to the population.
So that's the structure. The government financing gap I guess will go in another post.
Ugly truth number 1:
By many measures, the US economy is already in a recession. It isn't quite in one yet, because the correlations haven't totally formed a controlling downward interaction.
Take a good look at this graph. It has YoY changes for real retail sales (through November, blue), real disposable personal income (red, through Q3), and government current receipts (gross, not real, in green).
Real disposable personal income is at 0% increase over the year. This doesn't usually happen in the run-up to a normal US recession, much less in a recovery. It's a dire signal.
Here is a long time series of government current receipts and real disposable personal income:
Reminder: real disposable personal income is calculated by subtracting taxes from income plus adjusting for inflation.
The mid 1970s recession is kind of similar, and it was caused mostly by high structural inflation which cut real incomes. One of the problems was energy. That accounted for a lot of the problem. Another problem was that tax brackets weren't pegged to inflation, so many persons ended up with constantly declining real incomes.
Thus, during the 70s sequence you see the apparent paradox of very high growth in government current receipts while growth in real personal disposable income lagged and then collapsed. Both the mid-70s recession, which was a very deep one, and the early 81 recession were caused by falls in real disposable personal income.
Usually in the US big drops in real disposable personal income are at least partly the result of the recession, with two counter-balancing factors coming into play - costs tend to drop as consumption and spending drop, which raises real incomes for all the people who don't lose employment or income, and many people do lose employment or income, which causes a drop in real personal income.
One of the major factors in the last recession was that as inflation dropped out, early in the recession real incomes rose sharply. That helped a great deal, but as the housing and credit bubbles kept popping, the downward drag took over again. However it was not until late 2010, when the misguided QE2 pumped a lot more money into commodities, that inflation really took off and choked off the slow recovery in real personal income.
Now it should be obvious that the FICA payroll tax cut has impaired government revenues, although it did support real disposable personal income. Therefore, without increasing the federal deficit, real personal disposable incomes would look worse since late 2010.
Inflation will remain in the system through the next year. It may in fact be boosted by efforts to deal with the European debt crisis and the ripple effects, plus structurally slower real global growth.
US real retail sales do not show the normal pre-recession pattern of either continuously falling down to zero or getting stuck at no real growth. This is largely because of the FICA tax cut, which has to be one of the most ill-designed economic stimulus packages the US ever instituted post WWII. The FICA tax cut gave thousands in additional real income to a very small portion of the US population that already accounts for a disproportionate amount of personal consumption (because they have the money). This masked the fact that most of the population was seeing declining real incomes:
No problem at all, right? Or maybe it is.
The problem in the US is not wealthy people - it's that job creation has just stopped, and this plus inflation is depressing real incomes for most people. You don't have income mobility without jobs.
Living wage jobs have dropped over the course of a decade.
That red line is the number (absolute, not as a percent of working-age population) of full-time jobs. In eleven years, it hasn't increased.
The blue line is all jobs. We have added many part-time jobs, which diffuses the same level of income among a larger number of people who have less in the way of benefits.
Needless to say, we are supporting personal consumption with income transfers to the population. That's the black line.
The fundamentals for job creation have shifted slightly positively, despite the best efforts of our national government to destroy the economy. We cannot approach a real jobs recovery in less than 10 years, and if Obama gets another term make it 15 years.
The really strong element in the US economy preventing another recession is simply increased government transfers to the population.
So that's the structure. The government financing gap I guess will go in another post.
Wednesday, January 11, 2012
All The Chirpy EconoNews Doesn't Matter A Bit
When you are looking at stats like this:
Nonetheless, this week net imports were 5.2% down compared to the first week in January last year, and they are more than 10% down YoY over the last four weeks. Domestic production is up 4.7%. US electricity production was weak in the second half, so I am not that optimistic. I remain convinced that the best-case outcome for the US economy in 2012 would be a skipping recession.
There is more trauma in Europe, mostly of the financial variety, but today the Germans claimed that their economy shrank in the fourth quarter of 2011, and absolutely no one expects Q1 to be much better. Trying to make the case that the European economy is not in recession just got hugely more difficult. It probably requires drugs to fuel the effort, or perhaps buckets of liquor combined with major caffeine.
The German statement, which is an estimate, does explain why we're seeing the PMI weaknesses in the Eastern bloc countries the last couple of months. Several of those economies are tightly linked to the German economy.
Hey! Have I mentioned lately that I remain pretty positive on US Treasuries this year? When the US economy is holding up the world economy, and the US economy is weak on electricity and fuel, ya gotta a whole lot of weakness going on.
I do not mean to be cruel, but when you are a manufacturing economy, and you decide to rework your whole energy supply, and you don't even bother to build the transmission lines to link up the windfarms, you have no one to blame for the result but your own delusional self. The Germans are suing themselves into recession.
PS: And Monti is revolting. The 3 year Treasury auction soared.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.0 million barrels from the previous week. At 334.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 3.6 million barrels last week and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 4.0 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 0.9 million barrels last week and are in the upper limit of the average range. Total commercial petroleum inventories increased by 9.4 million barrels last week.This should start to pick up a bit, because the unusual activity late last year seems somewhat linked to construction and an easier winter causing seasonally high construction activity. There is also more southern activity than in previous years relative to the whole, so winter means less. Anyway, they often knock off over the holidays, and it will pick back up now. Some of the build is due to milder weather, especially propane.
Total products supplied over the last four-week period have averaged 18.4 million barrels per day, down by 6.5 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged 8.6 million barrels per day, down by 4.8 percent from the same period last year. Distillate fuel product supplied has averaged about 3.8 million barrels per day over the last four weeks, down by 2.2 percent from the same period last year. Jet fuel product supplied is 1.4 percent lower over the last four weeks compared to the same four-week period last year.
Nonetheless, this week net imports were 5.2% down compared to the first week in January last year, and they are more than 10% down YoY over the last four weeks. Domestic production is up 4.7%. US electricity production was weak in the second half, so I am not that optimistic. I remain convinced that the best-case outcome for the US economy in 2012 would be a skipping recession.
There is more trauma in Europe, mostly of the financial variety, but today the Germans claimed that their economy shrank in the fourth quarter of 2011, and absolutely no one expects Q1 to be much better. Trying to make the case that the European economy is not in recession just got hugely more difficult. It probably requires drugs to fuel the effort, or perhaps buckets of liquor combined with major caffeine.
The German statement, which is an estimate, does explain why we're seeing the PMI weaknesses in the Eastern bloc countries the last couple of months. Several of those economies are tightly linked to the German economy.
Hey! Have I mentioned lately that I remain pretty positive on US Treasuries this year? When the US economy is holding up the world economy, and the US economy is weak on electricity and fuel, ya gotta a whole lot of weakness going on.
I do not mean to be cruel, but when you are a manufacturing economy, and you decide to rework your whole energy supply, and you don't even bother to build the transmission lines to link up the windfarms, you have no one to blame for the result but your own delusional self. The Germans are suing themselves into recession.
PS: And Monti is revolting. The 3 year Treasury auction soared.
